Federal regulators are accusing Port Richey-based RAD Diversified REIT Inc. and its founders of defrauding more than 5,500 investors in a scheme that allegedly raised $152 million. The SEC says the company overstated its financial health, misrepresented share values and diverted millions for personal expenses as its real estate business deteriorated.
Key takeaways
- The SEC sued RAD Diversified, founders Brandon “Dutch” Mendenhall and Amy Vaughn, and an affiliated company on July 29.
- Regulators allege the defendants raised at least $152 million between November 2019 and March 2024.
- The company allegedly reported profits despite losses, mounting foreclosures and inadequate cash for investor redemptions.
- The SEC says nearly $5 million was diverted for personal expenses, including luxury purchases, private travel and entertainment.
- RAD Diversified and four affiliated entities filed for Chapter 11 bankruptcy protection in March 2026.
The allegations are contained in a 39-page civil complaint filed in federal court in Florida. The SEC is seeking financial penalties, repayment of allegedly ill-gotten gains, permanent injunctions and orders that could bar Mendenhall and Vaughn from serving as officers or directors of public companies.
How regulators say the scheme worked
According to the complaint, RAD Diversified marketed itself as a successful real estate investment trust that bought, renovated and rented residential properties. At its peak, the company controlled more than 550 homes, primarily in Florida and Pennsylvania, as well as properties in several other states.
The SEC alleges the company raised about $104 million through REIT stock offerings, $23 million through high-interest notes promising 20% returns and $16.5 million through joint real estate ventures. Marketing efforts included social media, podcasts, seminars and an internal sales force of about 60 people. The company also used messages centered on patriotism, Christian values and support for military veterans, regulators said.
Alleged financial misrepresentations
Investors were reportedly told that RAD Diversified was profitable and that no investors had lost money. The SEC, however, alleges the company recorded losses of at least $31 million in 2022 and $22 million in 2023, while annual rental income never surpassed $5 million.
The agency also disputes the company’s reported share valuations. Shares rose from $10 to $25.04 between 2019 and 2023, purportedly based on independent appraisals. Regulators allege the valuations were instead prepared by Mendenhall’s brother using online estimates and without professional appraisal expertise. The company also allegedly understated mortgage debt and stopped updating its share price after July 2023.
Foreclosures, frozen redemptions and bankruptcy
By early 2024, the company faced at least 166 foreclosure actions involving approximately $47 million in debt, according to the complaint. The SEC says investors were repeatedly assured they could redeem their shares, but requests were delayed or denied because the company lacked sufficient cash. Redemptions were frozen in February 2024, with at least $3 million in requests outstanding.
The complaint says the company encouraged some investors to use retirement savings, home-equity loans, credit cards and life-insurance proceeds to finance investments. RAD Diversified and four related entities later sought Chapter 11 protection, placing more than 300 properties under court supervision.
Alleged personal spending
The SEC alleges that about $54 million in investor funds was transferred to The Seminar Solution, a company owned by the founders. Of that amount, nearly $5 million was allegedly used for personal expenses.
Regulators allege Mendenhall moved about $1.4 million to personal accounts and used investor funds for tax payments, clothing, jewelry, entertainment and other expenses. Vaughn allegedly transferred about $1.5 million to personal accounts and spent investor money on private aircraft, luxury goods, jewelry, nightclubs, tuition and pet care.
Mendenhall also faces a separate federal mortgage-fraud case stemming from an indictment in May. He has denied those allegations. Florida’s attorney general is separately investigating RAD Diversified for potential violations of the state’s consumer-protection law.
Sources
- SEC accuses Port Richey real estate investment trust of $152M fraud scheme, Business Observer.